US sends nastygram to European Union over alleged Apple tax dodging

Brussels' officials once again deny accusations of bias against US firms.

Apple's battle with the European Union’s competition watchdog has been backed by the US government, which on Wednesday waded into the complaint over the iPhone maker's tax arrangements.

The US treasury warned in a white paper that Brussels' ongoing investigation into Apple’s tax deal with Ireland could “create an unfortunate international tax policy precedent.” On Thursday, the European Commission responded that there was “no bias” against US companies.

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The commission is considering whether the company used so-called “transfer pricing arrangements” to move profits around in order to avoid tax. Ireland is implicated in letting Apple pay a tiny amount of tax. Technically, this means that it may have benefited from illegal state aid.

“Tax rulings may involve state aid within the meaning of EU rules if they are used to provide selective advantages to a specific company or group of companies,” the commission states.

But the US treasury warned that Vestager's office was in danger of overstepping its bounds “beyond enforcement of competition and state aid law under the TFEU [Treaty on the Functioning of the EU] into that of a supra-national tax authority.”

It said it was considering “potential responses should the commission continue its present course,” adding: “a strongly preferred and mutually beneficial outcome would be a return to the system and practice of international tax cooperation that has long fostered cross-border investment between the United States and EU member states.”

Vestager has already ordered the payment of more than €20 million in back taxes from Starbucks and Fiat Chrysler over similar tax deals with the Netherlands and Luxembourg, and Ireland could be instructed to reclaim up to tens of billions of dollars from Apple.

The US government's bean counters are worried about the crackdown, however:

There is the possibility that any repayments ordered by the commission will be considered foreign income taxes that are creditable against US taxes owed by the companies in the United States. If so, the companies’ US tax liability would be reduced.

To the extent that such foreign taxes are imposed on income that should not have been attributable to the relevant member state, that outcome is deeply troubling, as it would effectively constitute a transfer of revenue to the EU from the US government and its taxpayers.

Put another way, the US treasury appears to be saying: "we get to tax our multinationals, not the EU."

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“A substantial number of additional cases against US companies may lead to a growing chilling effect on US-EU cross-border investment,” the treasury hit back.

On Thursday, the commission's spokesperson, Alexander Winterstein, said that it had taken note of the white paper, before drily saying that EU state aid rules have been in place for years.

“With regard to the insinuation of bias, let me repeat what commissioner Vestager has been saying, which is that EU law and competition rules apply indiscriminately to all companies operating in Europe, whether they are big companies or small companies, whether they are companies that are European or companies from outside Europe. There is absolutely no trace of a bias here,” he added.